India: Decisions Taken In The 28th GST Council Meeting

Union Finance Minister Piyush Goyal chaired the 28th GST Council
meeting held on 21 July 2018 in New Delhi. The meeting discussed a
plethora of issues such as simplification of return filing
procedure, recommending amendments, rationalization of GST rates,
etc. Some of the critical decisions taken have been summarized
below:

Simplification of return filing procedure

The GST Council (the Council) in its previous meeting held on 4
May 2018 had given in-principle approval to introduce a simplified
return filing procedure. Now, the Council has approved the format
and business process of the simplified return filing procedure. The
format of the returns has not been released in the public domain.
However, the Council vide a press release has revealed the
salient features of the same:

Return based on 'Upload - Lock -
Pay.' The return system would be as follows:

New return to contain two main tables
- One for reporting outward supplies and one for availing Input Tax
Credit (ITC).

ITC would be based on invoice
uploaded by the supplier.

Invoices can be uploaded continuously
by the seller and can be continuously viewed and locked by the
buyer.

The Council is yet to notify a date
for implementation of this simplified return filing procedure.

Recommendation of proposed amendments

The Council on 9 July 2018 had released a list of 46 proposed
amendments to the GST Law for stakeholder comments. Now, the
Council has recommended 17 out of these 46 proposed amendments to
the GST law. Key recommended amendments are:

ITC in respect of motor vehicles and
certain obligatory employee benefits to be liberalized.

On the filing of an application for
cancellation of registration, the taxpayer to be immediately
relieved from undertaking compliances.

Pre-deposit payable for the filing of
appeal before the Appellate Authority and the Appellate Tribunal to
be capped at INR 250 million and INR 500 million respectively.

Liability to pay interest on the
reversal of ITC due to non-payment of consideration to the supplier
within 180 days to be removed.

The requirement of linking
debit/credit notes to invoices to be removed.

Job work sector - place of supply in
case of job work of any treatment or process done on goods (e.g.,
gold, diamonds) temporarily imported into India and then exported
without putting them into any other use in India, to be outside
India.

Supply of services to qualify as
exports even if payment is received in INR, where permitted by the
Reserve Bank of India (viz. exports to Nepal and Bhutan).

The amendments would come into effect once they have been
enacted by the Parliament and the State Legislatures.

Rationalization of GST rates

The Council with effect from 27 July 2018 has rationalized GST
rates and related matters in respect of certain sectors. The key
decisions in this regard have been encapsulated below:

Sector

The decision by the Council

Agriculture and food

Exemption to following services:

Artificial insemination of livestock
(other than horses)

Works of installation and
commissioning undertaken by DISCOMs/electricity distribution
companies for extending electricity distribution network to the
tube well of the farmer/agriculturalist for agricultural use

Services provided by the Food Safety
and Standards Authority of India (FSSAI) to food business
operators.

Clarifications issued in respect of certain items:

Milk enriched with vitamins or
minerals salt (fortified milk) is exempt from GST

Water supplied for public purposes
(other than in sealed containers) does not attract GST.

Banking and IT

Exempt services supplied by an
establishment of a person in India to any establishment of that
person outside India, which are treated as establishments of
distinct persons in accordance with Explanation I in Section 8 of
the IGST Act provided the place of supply is outside the taxable
territory of India in accordance with Section 13 of IGST Act. This
amendment, though applicable to all, will be beneficial mainly for
companies in banking and IT sector.

GST on accommodation service to be
chargeable on 'transaction value,' rather than the
'declared tariff.'

Clarification to be issued to
restrict the scope of outdoor catering to supplies in case of
outdoor/indoor functions that are event-based and occasional in
nature. All other supplies such as the supply of food and drinks in
the restaurant, mess, canteen, eating joints and such supplies to
institutions (educational, office, factory, hospital) on
contractual basis would be chargeable to GST at 5%.

Transportation

Multimodal transportation to be
charged to GST under forward charge at 12% with full ITC

Extension of exemption granted on
outward transportation of all goods by air and sea by another one
year, i.e. till 30 September 2019.

Refrigerators, freezers and other
refrigerating or freezing equipment including a water cooler, milk
coolers, refrigerating equipment for leather industry, ice cream
freezer, etc.

Televisions up to the size of 68
centimeters.

Textile

Fabric sector to be allowed a refund of accumulated ITC on
account of inverted duty structure.

Miscellaneous

GST rates reduced from 28% to 18%

Paints and varnishes

Glaziers' putty, grafting putty,
resin cement

Lithium-ion batteries.

SKP's Comments

The Council has taken major decisions in view of the
representations received from various sectors of the industry. The
simplified return filing procedure along with the rationalization
of rates is expected to boost GST revenue and increase compliance
among businesses.

The next GST Council is scheduled to be held on 4 August 2018.
The meeting will primarily focus on the issues facing the Micro,
Small & Medium Enterprise (MSME) sector. The meeting will also
deliberate on promoting digital payments.

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